What Are the Implications of Brexit for UK Food and Agriculture?

ANALYSIS - If the UK votes to leave the EU in the forthcoming referendum, the British government would have to renegotiate all its trade deals with both Europe and third countries.

Speaking at the Agricultural and Horticultural Development Board Outlook 2016 conference in London, Prof Alan Matthews from Trinity College Dublin said that UK membership of the EU was as much about broader political questions as it is about economics.

And following Brexit, the UK government would have to decide how to fill the policy vacuum in those areas where the EU currently has competence, including trade, agriculture and other regulations.

Prof Alan Matthews said there would be policy unknowns in the event of a Brexit

He said the agricultural outlook would also depend on the wider economic performance of the country and what the Common Agricultural Policy and the EU regulations might look like after 2020.

Prof Matthews said that if the British people vote to leave it would mean a complete change in policy, but the shape of trade, agriculture, regulatory policy for both the UK and the EU would be complete unknowns.

If the UK votes to leave the EU, the Lisbon Treaty allows two years for a withdrawal agreement to be drawn up between the EU and any country that wants to leave.

Prof Matthews told the conference that part of that agreement would be to establish new trading arrangements with the EU and the different options at present available could be at a high cost.

He said that one option would be to have an agreement such as the one the EU has with Norway, where the UK would rejoin the European Economic Area and EU laws would have to be transposed into UK law but without the UK having a say in the regulatory process.

Another option would be the Swiss option of bilateral agreements, but he said this too would require adherence to the EU regulations without having a say in their formation.

A third option that is seen with Turkey would establish a customs union, but this might bind the UK to trading regulations that might not be suitable.

The UK could opt for deep and comprehensive free trade agreements as the EU has established with Canada and is negotiating with the US, or it could opt to follow the WTO framework of a most favoured nation.

However, Prof Matthews said that these options would see the re-imposition of tariff barriers between the EU and UK.

Whether the UK could negotiate zero tariffs for livestock and livestock products would be questionable, Prof Matthews said.

The question of how the UK and EU would renegotiate trading arrangements could add uncertainty to the future of the UK’s food supplies.

If the UK opted to be governed by the World Trade Organisation rules of a most favoured nation, the UK would be bound by the current EU-WTO arrangement and it would throw up questions over whether the UK would receive a share of current tariff rate quotas for products such as lamb and butter from New Zealand and the Hilton quota for high quality meat products.

“The most favoured nation tariffs would be bound by the current EU bindings and the UK would want to lower these tariffs,” Prof Mathews said.

He said that apart from fish, the UK is a net importer of the main agricultural and livestock products.

“The EU is the UK’s dominant trading partner in agricultural products and trade with the EU is hugely important both ways,” he said.

“But the EU is a far more important trade partner for the UK than the UK is for the EU.”

Prof Matthews added: “My expectation is that future EU27-UK agrifood trade flows would remain duty-free, but the UK will stay outside the single market.”

He said in the event of a Brexit this would require a EU27-UK free trade agreement, but it would also mean the reintroduction of border controls, including along the border between Northern Ireland and the Irish Republic.

These controls would require the introduction of plant and animal passports, sanitary and phytosanitary checks and requirements to meet EU regulations on exports to the EU and for the EU to meet British requirements.

This would bring higher trade costs equivalent to tariffs which Prof Matthews estimated could be at least 5 per cent.

He said that an exit from the EU would also bring into question the support for farmers and agriculture in the as much of the current farm income is dependent on the CAP.

“Will the amount be greater, smaller or the same compared to transfers in CAP post 2020?” he said.

“Will the design of payments be different? Will payments be conditional on farming practices?”

Prof Matthews said he expected little impact on food prices in the UK in the event of a Brexit and there could be a benefit to the UK as at present the UK is a net contributor to the EU budget.

However, he added that the shape of the CAP and the regulatory regime in the EU could change after 2020 and this all throws up questions about how these changes might affect a UK outside the EU as well as one within it.